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Disrupting Illegal Markets: Evidence from a Lottery Intervention

Author

Listed:
  • Natt Hongdilokkul
  • Archawa Paweenawat
  • Krislert Samphantharak
  • Suparit Suwanik

Abstract

This paper studies the effects of a temporary supply-side intervention on illegalmarket activity using a natural experiment from lottery markets in Thailand. Between 2003 and 2006, the Thai government combined a crackdown on illegal lotteries with the introduction of a legal substitute. Using household-level panel data, we show that the intervention led to a sharp decline in black-market lottery spending, with only limited substitution to the legal lottery. After the policy was reversed, households shifted back toward the black-market lottery, indicating substantial substitution into the illegal market once the legal alternative was removed. Despite this rebound, the intervention had persistent effects: black-market lottery spending remained below its pre-intervention level even after enforcement ended, with no evidence of offsetting substitution toward other forms of gambling. These findings suggest that, in this setting, a temporary supply-side intervention generated a lasting reduction in illegal-market activity, raising the possibility that evaluations based only on short-run responses may underestimate the long-run effects of enforcement policies.

Suggested Citation

  • Natt Hongdilokkul & Archawa Paweenawat & Krislert Samphantharak & Suparit Suwanik, 2024. "Disrupting Illegal Markets: Evidence from a Lottery Intervention," PIER Discussion Papers 218, Puey Ungphakorn Institute for Economic Research, revised Sep 2026.
    • Handle: RePEc:pui:dpaper:218
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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